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Collection Agency: Love to Hate?

Google “collection agency”. You will see a ton of articles about what to do if you are contacted (“harassed”) by a collection agency, as well as advertisements from attorneys willing to prosecute your Fair Debt Collection Practices Act (FDCPA) claim against an agency.

Believe it or not, reputable collection agencies (and most are reputable) believe in the FDCPA and work hard to comply with the law. The advice I always give to small business owners looking to hire a collection agency is to ask about an FDCPA training program for their collectors – a must to make certain your customers will be treated with respect.

Don’t get me wrong, there are abuses. However, the debt collection industry is like any other, with good and bad players. The debt collection industry represents the largest source of complaints to the Consumer Financial Protection Bureau. However, there is some feeling that the methods of data collection used by CFPB might not accurately reflect consumer issues with debt collectors.

Of course, my industry may be unique in we are often resented by both our collection clients and the people who owe them money. Our clients see us as a necessary evil, and the resentment they feel about not being paid often transfers to the collection agency when they see a portion of their hard-earned money going to collection agency fees, truly adding insult in injury.

What are the other options?  Do it yourself? Sure, you should have a program in place to collect as much as you can in-house. A good consistent program will certainly cut down on the files you need to refer for outside collection. Hire an attorney? Yes, some cases can be settled by an attorney, but not all files are right for litigation, and there is are still costs associated?. Just ignore the delinquent accounts and take a tax write-off? Well, that rarely gives you much relief, if it helps at all.

Consider a recent study done by Fundbox that reported some $825 billion in unpaid invoices to small businesses in the US alone. The study conjectured that if all unpaid invoices were paid on time, small businesses across the country could hire 2.1 million new employees, thereby reducing unemployment by 27 percent – how is that for a jobs program?

Not getting paid by customers can also mean that you are unable to grow your business by physical expansion, purchase of equipment, sales and marketing. You may even have to raise your prices.

The collection industry’s trade Association, ACA International reported that in 2013, third party collection agencies returned nearly $50 billion to their customers.

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